How Do I Know The R&D Tax Advisor I Partner With Will Deal Effectively With Any HMRC Enquiries?
When it comes to R&D Tax Credits there’s quite a bit to get your head around. But choosing an R&D tax advisor is an important decision that could well bring in thousands of pounds of much needed cash. As your client’s business accountant, it’s vital that you understand this (rather complex) tax relief scheme in detail. This is where Myriad Associates come in - we will work alongside you as your R&D Tax Credits specialist.
What are R&D Tax Credits specifically?
Innovative UK companies can access tax relief to help with the costs of their research and development activities - the scheme is called R&D Tax Credits. It’s offered by the government to encourage growth and innovation by supporting companies that are seeking to improve or overcome particular uncertainties or challenges. This could be in developing a brand new product, service or process, or in enhancing an existing one. The relief is offered either as a reduction in your client's Corporation Tax or as a cash lump sum. It's administered by HMRC and is open to all UK companies, regardless of whether or not they're turning a profit.
No matter how big or small a company is, there’s a solution to suit
If, for the purposes of claiming R&D Tax Credits, your client’s company is considered a small or medium sized enterprise (SME), then they must apply using the SME branch of the scheme. To do this, they should employ no more than 500 staff and have either a balance sheet of under €86 million or an annual turnover of less than €100 million.
If your client’s company is larger, and employs more than 500 staff, it needs to claim under the Research and Development Expenditure Credit (RDEC) branch of the scheme. It should also have a turnover greater than €100 million and over €86 million in gross assets. Find out everything you could ever need to know about RDEC.
What is the relief worth?
Typically an SME can get back as much as 33% of its expenditure on eligible R&D work. We have many years of experience and understand what HMRC are looking for, meaning we ensure you get the best out of your entitlement.
In terms of the RDEC part of the scheme, when launched in April 2013 the benefit stood at 10%. However, this was increased to the current rate of 12% in January 2018. Companies can claim RDEC as far back as two financial years after the R&D work took place.
Could your client be eligible?
Think about current and/or recent clients and ask yourself:
- Did they recently design, develop and manufacture new products or services?
- Did they recently make any prototypes or carry out any testing?
- Did they recently develop any IT or software solutions?
- Have they recently sought to improve any products, services, processes, devices or materials?
- Have they invested in any products that never went to market?
- Have they undergone an R&D project that ultimately failed?
- Do they employ any staff with a scientific or technology background?
Obviously you probably won’t know the answers to these off the top of your head, but based on your knowledge of their industry and general accounting activities, it’s well worth asking them. If any of the above apply, your client is likely eligible to make a claim for R&D Tax Credits.
Claiming R&D Tax Credits is easy - isn’t it?
Unfortunately no, not particularly. HMRC are very specific about the types of spending that can be claimed for and how the application is put together. Companies need to provide a comprehensive written narrative explaining why they believe their project qualifies. There is also a lot of specific financial data required and it’s very easy to accidentally under claim or over claim. At best this means companies can miss out on a large amount of money, but at worst it could mean HMRC opening an enquiry into your client’s tax affairs; stressful, expensive and well worth avoiding. Plus, even if the application is accurate and is accepted by HMRC, it still regularly chooses companies at random to further inspect their claim anyway - after all, this is public money we’re talking about.
So how do I know the R&D tax advisor I partner with will deal effectively with any HMRC enquiries?
After a business has finally submitted its application for R&D Tax Credits, the wait begins to see if it’s been successful. However as mentioned, a proportion of claims submitted each year are selected by HMRC for further review.
When HMRC first receives a claim, it will examine the associated documentation for any weaknesses or risks. If any answers to their questions are unsatisfactory, an enquiry will be opened. This is where things can get very tricky and the stakes are raised, which is why partnering with a good quality R&D tax credit adviser is so important.
When asking R&D tax advisors for an overall success rate, pretty much everyone will say 100% successful. A more pertinent question to ask is “What is your enquiry rate?”. For information, anecdotally we believe the industry average to be around 8%, however we’re pleased to say we’ve actually had no official enquiries at all. This is because we make sure all our clients’ applications are strong, advanced and of the highest quality.
Another thing that’s worth checking is if the quoted fee is inclusive of enquiry support. If it’s not, this could be a costly add-on later if an enquiry comes about.
Other useful questions to ask include: “Have you ever withdrawn a claim?” “What is the typical revision rate” and “Have you ever lost a case?”. Although they may not have this information to hand immediately, any R&D advisor worth their salt will work hard to supply it for you.
Speak to Myriad Associates today
As a trusted business accountant it’s crucial that you provide the most accurate advice in all areas of R&D tax relief alongside your general services. Myriad Associates consists of an expert team in the field of R&D Tax Credits and we would be happy to work alongside you in making a high-quality, hassle-free claim on behalf of your client.
Call us now on 0207 118 6045 or use our contact page.